 "Bharti Airtel: Shedding tower assets, more in store")
The Bharti Airtel stock was up two per cent after the company announced it had completed the sale of telecom towers in five African countries for a consideration of about $1.3 billion. The company has said it will use the proceeds to reduce its net debt, currently stands at $11 billion. Including the deferred payments, the total debt is pegged at $15 billion or Rs 90,000 crore by analysts. At the current net debt level, the sale should bring down debt by about 12 per cent and help save interest costs. Interest costs increased to Rs 5,013 crore in FY15, from Rs 3,660 crore in FY14
While Bharti has completed the agreement in five countries, it expects to complete the sale of tower assets in another six countries over the next six-seven months, as agreements for another two countries have lapsed. Analysts had estimated the entire 18,000 tower portfolio will fetch $3-$3.5 billion (Rs 18,000-21,000 crore). This is being revised to about $3 billion, excluding the two countries where agreements had lapsed.
ALSO READ: Airtel sells tower assets for $1.3 bn in five countries in Africa
While debt is reduced, expect network operating costs to go up, with analysts estimating this number to go up from 22 per cent of African revenues to about 26 per cent. IIFL had earlier calculated the tower deals will be cash flow-accretive to the tune of $100 million annually, given $320 million of annual tower capex savings, though this will be offset by higher rental expenses.
On the India business which accounts for 70 per cent of the company’s revenues and all its profits the Street will be eyeing the disruptive nature of RJio’s roll-out and the market share the company can retain. Bharti, however, is gearing up by way of improving its 3G/4G network, which along with lower debt will strengthen its leadership position.
While Bharti has completed the agreement in five countries, it expects to complete the sale of tower assets in another six countries over the next six-seven months, as agreements for another two countries have lapsed. Analysts had estimated the entire 18,000 tower portfolio will fetch $3-$3.5 billion (Rs 18,000-21,000 crore). This is being revised to about $3 billion, excluding the two countries where agreements had lapsed.
ALSO READ: Airtel sells tower assets for $1.3 bn in five countries in Africa
While debt is reduced, expect network operating costs to go up, with analysts estimating this number to go up from 22 per cent of African revenues to about 26 per cent. IIFL had earlier calculated the tower deals will be cash flow-accretive to the tune of $100 million annually, given $320 million of annual tower capex savings, though this will be offset by higher rental expenses.
On the India business which accounts for 70 per cent of the company’s revenues and all its profits the Street will be eyeing the disruptive nature of RJio’s roll-out and the market share the company can retain. Bharti, however, is gearing up by way of improving its 3G/4G network, which along with lower debt will strengthen its leadership position.